The Political Economy of Brazil
Last week I took a group of 42 Wharton MBAs to Brazil for an incredible pedagogical experience. I left with more questions than answers.
One of the great advantages of a Wharton MBA education is the Global Modular Course, a for-credit intensive course led by Wharton faculty to far-flung corners of the world. This academic year, my colleagues Ziv Katalan and Amy Nichols organized a dazzling 18 such courses, from Rwanda to Saudi Arabia, Thailand to Mexico, France to China. Each course has a different theme and focus, reflecting the expertise of the faculty member leading it.
As mentioned previously, this year, for the second time, I took a group of 40 students and 2 teaching assistants to Brazil to study this extraordinary country’s political economy. Our focus was to think through the ways that the sometimes-brittle, sometimes-resilient political institutions of Brazil intersect with the incredible vitality and energy of the country.
I have been a student of Brazilian history, economics, and literature for almost 25 years. I love the country; it is probably the country I know best beyond the US. Even so, I learned an enormous amount from the week, from each conversation with our great hosts and guests throughout the week and from my excellent students and TAs.
This post summarizes some of those impressions. Because we operated under Chatham House rules to encourage candor with our speakers, I won’t attribute any of my thoughts or reactions to any specific companies or people.
Pix and the Public-Private Dynamics of Financial Innovation
One topic that came up over and over again is the explosive adoption of Pix, the Brazilian Central Bank’s instant payment rail (and app). Pix is a digital public infrastructure project launched in 2020 and adopted throughout the country at breathtaking speed. Today, more than 80% of Brazilians use it. Its adoption was everywhere.
I have had (and still have) some concerns about Pix as public infrastructure, in part out of concerns for the pace of innovation and security (given that Pix operates only through legislative appropriations and has no meaningful budget for either innovation or security) and in part because the central bank operates a retail payment rail and regulates competitors, creating an obvious conflict of interest.1
What is remarkable from my 2025 visit is how overwhelmingly popular Pix is even inside institutions that would conceivably produce competitors to it. I heard nothing but praise for Pix from every corner, including my Uber drivers (I asked each one), businesses in the financial sector, businesses outside of it. They regard Pix as a major success.
That very success may well lead to challenges. Last week, while we were there, Finance Minister Fernando Haddad announced that the government would scrap a proposal to require financial institutions to report Pix transactions exceeding R$5,000 for individuals (about $800 USD) and R$15,000 for companies (about $2500 USD). This is basic anti-money laundering: if I were a legislator or Finance Minister, I would strongly support some sort of AML reporting requirement along these lines.
The swirl of rumors and misinformation about what this reporting would mean doomed the proposal, however. For such a widely used infrastructural product as Pix, changes to its status will become incredibly difficult. Even so, Pix has made an enormous impact on the financial system and society.
Everything is fintech
Another lesson learned is just how inventive Brazilian companies and nonprofits are in the face of financial institutional barriers. One can peruse public data about two juggernauts in the Brazilian economy, Nubank and Mercado Libre, to get a glimpse of how important and dynamic the space is for new technological opportunities in finance and intermediation. There is no separation between commerce and banking in Brazil as there is in the United States, permitting companies like Mele—an Amazon competitor—to create a large suite of financial products to their customers. Nubank is a similarly innovative company that predated Pix for instant payments and had the chutzpah to challenge a deeply entrenched incumbent banking sector to great effect.
This idea that all of these companies are participating in a major way in renovating and innovating the Brazilian financial sector reminds me of one of my favorite books of 2024, Dan Awrey’s vital Beyond Banks: Technology, Regulation, and the Future of Money, which argues, among much else, that the technology of money and banking and the laws of money and banking are always out of sync in ways that create stressors for the bundled activities we associate with “banks” but should not. Dan mentions Brazil (and Pix) briefly, but the entire economy is an example of the dynamics he describes.
The Jeitinho Brasileiro
One of the key themes of the course is to pay close attention to the “ jeitinho brasileiro,” or Brazilian way. This speaks to the flexibility, inventiveness, creativity, and sheer spunk that people encounter in Brazil’s vibrant society and economy. It also speaks to some downsides. We discussed at length the Lava Jato corruption investigation and the ways that Lava Jato still looms over the political economy of Brazil. But what impressed me most was the sheer optimism of the place, including as it battles intense currency depreciation (the Brazilian Real was down more than 20% against the USD in 2024). Indeed, in several presentations we heard a long list of existential challenges facing Brazilian economic development, followed by concrete, optimistic, and very specific ways that these entrepreneurs, activists, and officials are responding to them. It was the Brazilian way on full display.
One striking example jumped out. We asked one of our presenters about a competitor that had lost significant value relative to the presenter’s company and wanted to understand that dynamic better. The said “well, that business model wasn’t built for an environment of 13% interest rates.”
I sat up when I heard this. The same could be said for virtually every American company doing business in the United States. Brazilian entrepreneurship and innovation is not for the faint of heart.
Wharton MBA students
The last lesson I will describe here is one I have learned many times before but still thrill to experience. It has nothing to do with Brazil and everything to do with these incredible MBA students I get to teach at Wharton.
I spent the week with some of the finest people I have ever taught, a statement I seem to make regularly but is no less true for the repetition. Each of these students is like reading a great novel. You sit next to one briefly and learn a few identifying facts and interests in the course, and then, over the week, we learn about heartbreaks and aspirations, skepticism and enthusiasm, ideological certainties and uncertainties, and so much more. In each of these sessions, the students had their phones in their bags or pockets and were riveted on our presenters. Their questions were incredibly sharp and smart, well prepared and playful.
At one point, a student made a profound observation about the ways that economic incentives may be undermining the achievement of specific social aims and leavened the comment with the aside that “maybe it wasn’t very Wharton-like” to challenge that specific articulation of orthodoxy. I intervened to say that it was precisely Wharton-like because it was made by that student, who was a card-carrying member of the Wharton community. Everything was on the table for evaluation and reevaluation in my Wharton classroom, in Philadelphia or Sao Paulo.
I had hoped my students would show up in force with that kind of fearless evaluative framework at the ready. They did not disappoint. Instead, they reminded me why I, like so many of the Brazilians we encountered, see the world’s many complications with clear eyes, but do so too with a full heart. When I think of the future that these students will invent, I am willing to bet that we can’t lose.2
This latter dynamic is the subject of a fascinating paper by my friend Aaron Klein; I have a draft paper on the “operator-regulator conflict in payments” I am tooling away at that takes a slightly different view, stay tuned.
With all apologies to Friday Night Lights for that bastardization.